Improving Repayment Options for Federal Student Loan Borrowers, 35241-35243 [2012-14537]

Agencies

• Executive Office of the President

[Federal Register Volume 77, Number 114 (Wednesday, June 13, 2012)]
[Presidential Documents]
[Pages 35241-35243]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-14537]




                        Presidential Documents 



Federal Register / Vol. 77, No. 114 / Wednesday, June 13, 2012 / 
Presidential Documents

___________________________________________________________________

[[Page 35241]]


                Memorandum of June 7, 2012

                
Improving Repayment Options for Federal Student 
                Loan Borrowers

                Memorandum for the Secretary of Education [and] the 
                Secretary of the Treasury

                More individuals than ever before are using student 
                loans to finance college. Nearly two-thirds of college 
                graduates borrow to pay for college, with an average 
                debt upon graduation of about $26,300. While a college 
                education remains an excellent investment, this debt 
                can be overly burdensome, especially for recent 
                graduates during the first few years of their careers.

                The Income-Based Repayment (IBR) plan for Federal 
                student loans currently allows former students to cap 
                their student loan payments at 15 percent of their 
                current discretionary income. This plan can be an 
                effective tool for helping individuals to manage their 
                debt, especially during challenging economic times.

                Over the past several years, my Administration has 
                worked to improve repayment options available to 
                borrowers, including through passage of an enhanced 
                Income-Based Repayment plan, which will cap a Federal 
                student loan borrower's monthly payments at 10 percent 
                of his or her discretionary income starting in 2014. 
                And we are pursuing administrative action that may 
                extend these lower payments to some students as soon as 
                the end of this calendar year.

                However, too few borrowers are aware of the options 
                available to them to help manage their student loan 
                debt, including reducing their monthly payment through 
                IBR. Additionally, too many borrowers have had 
                difficulties navigating and completing the IBR 
                application process once they have started it.

                For many borrowers, the most significant challenge in 
                completing the IBR application has been the income-
                verification process, which, until recently, required 
                borrowers to provide a signed copy of their income tax 
                return. Although the Department of Education has 
                recently removed some of the hurdles to completing the 
                process, too many borrowers are still struggling to 
                access this important repayment option due to 
                difficulty in applying.

                Therefore, by the authority vested in me as President 
                by the Constitution and the laws of the United States 
                of America, I hereby direct the following:

                Section 1. Streamlined Application Process for Income-
                Based Repayment Plans. By September 30, 2012, the 
                Secretary of Education, in coordination with the 
                Commissioner of Internal Revenue, shall create a 
                streamlined online application process for IBR that 
                allows student loan borrowers with federally held loans 
                to import their Internal Revenue Service income data 
                directly into the IBR application. This process will 
                allow income information to be seamlessly transmitted 
                so that borrowers can complete the application at one 
                sitting. Federal direct student loan borrowers shall no 
                longer be required to contact their loan servicer as 
                the first step to apply.

                Sec. 2. Integrated Online and Mobile Resources for Loan 
                Repayment Options and Debt Management. By July 15, 
                2012, the Secretary of Education shall:

                (a) create integrated online and mobile resources for 
                students and former students to use in learning about 
                Federal student aid, including an explanation of (1) 
                the current IBR plan, which allows student loan 
                borrowers

[[Page 35242]]

                to cap their monthly loan payments at 15 percent of 
                their discretionary income and be eligible to have 
                their remaining loan balances forgiven after 25 years 
                of responsible payments; and (2) the proposed Pay As 
                You Earn plan, which will allow many students to cap 
                their monthly loan repayments at 10 percent of their 
                discretionary income and be eligible for loan 
                forgiveness after 20 years of responsible repayment; 
                and

                (b) develop and make available to borrowers an online 
                tool to help students make better financial decisions, 
                including understanding their loan debt and its impact 
                on their everyday lives. This tool should incorporate 
                key elements of best practices in financial literacy 
                and link to students' actual Federal loan data to help 
                them understand their individual circumstances and 
                options for repayment.

                Sec. 3. Improved Notification of the Income-Based 
                Repayment Plan. The Secretary of Education shall 
                instruct Federal direct student loan servicers to make 
                borrowers aware of the option to participate in IBR 
                before a student leaves school and upon entering 
                repayment. Within 1 year of the date of this 
                memorandum, the Department of Education shall make 
                available, for institutions of higher education, a 
                model exit counseling module that will enable students 
                to understand their repayment options before leaving 
                school and to choose a repayment plan for their student 
                loans that best meets their needs.

                Sec. 4. General Provisions. (a) Nothing in this 
                memorandum shall be construed to impair or otherwise 
                affect:

                (i) the authority granted by law to an agency, or the 
                head thereof; or

                (ii) the functions of the Director of the Office of 
                Management and Budget relating to budgetary, 
                administrative, or legislative proposals.

                (b) This memorandum shall be implemented consistent 
                with applicable law and subject to the availability of 
                appropriations.

                (c) This memorandum is not intended to, and does not, 
                create any right or benefit, substantive or procedural, 
                enforceable at law or in equity by any party against 
                the United States, its departments, agencies, or 
                entities, its officers, employees, or agents, or any 
                other person.

[[Page 35243]]

                The Secretary of Education is hereby authorized and 
                directed to publish this memorandum in the Federal 
                Register.
                
                
                    (Presidential Sig.)

                THE WHITE HOUSE,

                    Washington, June 7, 2012.

[FR Doc. 2012-14537
Filed 6-12-12; 8:45 am]
Billing code 4000-01-P